President Biden signed the American Rescue Plan Act of 2021 (“ARPA”) on March 11, 2021. Here is an overview of the most important characteristics that affect employers.
In general, after the loss of employer-sponsored health insurance benefits under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), eligible employees may continue to receive such benefits at their own expense for up to 18 months, which means that employees are usually responsible for the entirety are the premium amount plus an additional administration fee of 2 percent.
ARPA endeavors to assist employees who are involuntarily terminated or who experience a reduction in working hours that results in a loss of coverage (“Eligible Persons”). Between April 1, 2021 and September 30, 2021, employers must subsidize 100 percent of the COBRA Continuing Coverage for all eligible individuals who have completed COBRA registration. Employers are later reimbursed by the federal government through tax credits on their quarterly wage taxes. Employees who have voluntarily left employment, been terminated for gross misconduct, or are eligible for other group insurance or Medicare are not eligible for subsidized insurance.
Employers are obliged to inform eligible persons about the subsidized coverage. Persons who have discontinued or previously rejected their continued insurance must receive this notification by May 31, 2021. Individuals whose COBRA electoral term expired before April 1, 2021 will have an additional 60 days from receipt of their notification to choose coverage, even if they have previously discontinued or declined COBRA coverage. Employers are also responsible for notifying individuals between 15 and 45 days of the upcoming expiration of their COBRA subsidy and insurance. Employers who fail to provide required notices may be subject to an excise tax of up to $ 200 per retired employee per day of non-compliance. The Department of Labor has issued sample notices to assist employers with these requirements.
Voluntary Paid Tax Credit for Sick and Family Vacation
ARPA also expands and extends the availability of refundable tax credits to insured employers (i.e., employers with 500 or fewer employees) who give voluntarily paid leave to employees for qualified reasons.
Under the ARPA, employers can voluntarily grant an employee up to 80 hours of paid sick leave (EPSL) between April 1 and September 30, 2021 if the employee:
- Subject to any state, state, or local quarantine or isolation order related to COVID-19;
- Recommended for self-quarantine by a healthcare provider due to concerns about COVID-19;
- Learn about symptoms of COVID-19 and seek a medical diagnosis;
- Seeking or waiting for the results of a COVID-19 diagnostic test based on exposure to COVID-19 and / or based on the tests requested by the company;
- Receiving immunization related to COVID-19;
- Recovery from injury, disability, disease, or condition as a result of obtaining immunization related to COVID-19;
- Caring for a person who is subject to a quarantine or isolation order or who is advised to self-quarantine due to concerns about COVID-19;
- Caring for a son or daughter whose school or childcare facility is closed or unavailable due to COVID-19 precautions;
- Experiencing another essentially similar condition as determined by the Minister of Health and Human Services in consultation with the Minister of Finance and the Minister of Labor.
Paid vacation for reasons 1, 2, 3, 4, 5, and 6 above is paid at the employee’s regular wage, which is capped at $ 511 / day. Paid vacation for reasons 7, 8, and 9 above is paid at a rate equal to two-thirds of an employee’s regular wage or minimum wage, whichever is greater and is capped at $ 200 / day.
As part of the ARPA, employers can grant EFML (Emergency Family Medical Leave) leave of up to twelve weeks for any of the above reasons. This vacation is paid at a rate equal to two-thirds of a worker’s regular wage or minimum wage, whichever is greater, capped at $ 200 / day for a total of $ 12,000.
Employers wishing to voluntarily grant EPSL and / or EFML leave will only be eligible for the applicable tax credits if they do not grant discriminatory leave. This means that employers should not favor full-time, highly paid, or senior employees.
It is important to note that the Department of Labor has not yet issued guidance on how to implement and manage ARPA.
Employee Loyalty Credit
ARPA also encourages employers to keep employees on their payroll through employee loyalty credits (“ERCs”). ERCs provide employers with a refundable social security tax credit for 50 percent of the qualified wages paid to their employees. An employee’s wages are considered qualified if the employer keeps the employee on the payroll while his (1) operation is wholly or partially suspended due to a COVID-19-related shutdown order. or (2) gross income for the calendar quarter is less than 50 percent of gross income for the same quarter of 2019. Tax credits are capped at $ 7,000 per employee per quarter and $ 14,000 per employee for 2021.
Additional facilities are available for “recovery startup companies”. Under ARPA, a recovery startup is one that began operations after February 15, 2020 and has average gross annual revenues that do not exceed $ 1,000,000. Instead of receiving the ERCs, these employers can receive a tax credit of up to $ 50,000 per quarter for all employees through the end of 2021.